Muliplication of Risks

The Wall Street Journal's David Wessel's father was my pediatrician, so I've always assumed he was a smart guy. (I don't know him.) He hit on a very important point in his story about the Medicare bill today. Fortunately for those of us who don't subscribe to the WSJ, Brad DeLong posted about half of it. Medicare Reform?: Archive Entry From Brad DeLong's Webjournal:

[The so-called "premium support"] is a big switch from today's Medicare. The current system charges every participant the same premium, provides a fixed menu of benefits, and generally pays doctors and hospitals on a fee-for-service basis. About the only way the government controls spending is by squeezing those fees. The change would be akin to the continuing move away from defined-benefit pensions (for which employers promise a monthly check) to defined-contribution pensions like 401(k) plans (for which employers put aside money and workers manage investments). It would give the elderly more choices of health plans -- though not necessarily as much latitude to pick a doctor as they have today -- and force them to bear the consequences of such choices.

We have to stop looking at each of these proposals, whether it's Medicare premium support or partial privatization of Social Security, in isolation, and instead see them, as Wessel does, in the context of a much larger pattern in which we have, as a society, exchanged security for risk, always in the name of choice. The shift in pensions is one good example, and so is the shift of most individual savings from FDIC-insured accounts to mutual funds and direct stock ownership. (see p. 4 of this report.) The reemergence of huge long-term deficits is another example -- it creates a lot of problems, but one of them is simply that it increases the risk of heading into a future economic downturn without the capacity to stimulate the economy.

Choices are great to have, but at a certain point, shifting everything from secure foundations with limited choices, to high risk ventures with more choices, actually makes it harder to make realistic choices. How can you decide whether to put your retirement savings in a high-risk venture if you're not sure whether your basic medical needs will be taken care of through Medicare? A certain base of security is essential for people to take the risks of entrepreneurship and investment. At the same time, many people, especially those influenced by the casino ideology of the right, will go "all in," making the riskiest choice in each area, without the careful evaluation of the consequences of interlocking risks which modern economics shows is one of the most difficult calculations for anyone to make.

I hope Democrats can begin to learn to talk not just about programs, programs, programs, but about the consequences of this overwhelming shift away from security, toward risk and choice, risk, risk and more risk. It's not just about Medicare and Social Security, ever popular as those words and programs may be, but really about how we make fundamentally responsible choices for the future.